WA new home sales volumes at dangerously low levels : HIA

Buying a new home in Western Australia is “akin to navigating a plane through the volcanic ash cloud emerging from a vociferous eruption”, according to the Housing Industry Association.

This dire analogy follows news that new home sales in WA decreased by 6% in May (compared with a national of -2.4%) to what the HIA says are “dangerously low volumes”.

Over the three months to May 2011, new house sales in WA have fallen 5.2% on the previous quarter.

“Housing affordability has deteriorated in Western Australia in recent years in the face of, among other factors, inadequate land supply and a consequential sluggish rate of new home building,” the HIA’s May 2011 quarter new home sales report says.

“If any inroads are to be made on the Western Australian affordability dilemma, policy action is required to provide a shot of adrenalin in addition to longer-term reform.”

The May 2011 decline in new home sales is led by NSW, where new home sales have fallen by 7.8%. However, the state recorded growth in new home sales for the six consecutive months.

New home sales in NSW are up 21% in the May quarter, compared with the previous quarter.

The outlook for NSW new home sales is poor, given uncertainty over interest rates

“New South Wales desperately needs to maintain upward momentum in new home sales, and secure a pattern of consistency. Failure to do so will only see a worsening of the housing shortage and ongoing deterioration in already poor affordability conditions,” the report says.

“Expediting land supply, hastening building approval processes and reducing excessive new infrastructure taxation would go a long way toward this.”

Victorian new home sales have also declined sharply in May – down 6.7%.

The HIA calls this result a “discontinuation of a heartening upward trend in new home sales”. For the May 2011 quarter, though, Victorian new home sales are up 7.8%.

In South Australia, new home sales have fallen 3.2% in May, the seventh consecutive month of declines. They are down 13% for the May 2011 quarter.

“New [South Australian] home sales continue to stumble in the face of some formidable headwinds. The foremost headwind would no doubt be above-average bank lending rates, combined with ongoing rhetoric suggesting the need for more hikes this year,” the HIA report says.

“However, the second-most influential factor keeping activity down is credit constraints. Small to medium developers are struggling to acquire finance from a reduced volume of bank lenders who, in fact, have a very low appetite for debt in the property industry at this present time.”

Sales of detached houses increased by 19% in Queensland, but from a very low base. For the quarter they are up 5%.

The HIA says the Building Boost Grant of $10,000 announced in the Queensland state budget for those households who build or buy a new home bodes well for some rallying in new home sales in the final months of 2011.

“However, given the policy won’t be introduced until August “it’s likely to be really tough going for the new home building industry at least until the fourth quarter of this calendar year,” it says.

National unit sales continue to be volatile, up by a healthy 23.3% for the month but still down 8% over the three months to May.

Nationally, combined new homes and units sold in May 2011 eased by 0.2% to leave sales volumes well down on their average for the last twenty years.

"Leading indicators of new home construction are universally weak and unfortunately the May update for new home sales is no exception,” says HIA chief economist Harley Dale.

“The combination of supply-side obstacles which include a lack of available finance, and softer demand which is not helped by incessant chatter about a fictitious house price bubble, is reflected in new home building indicators being well down,” he says.

“In the absence of policy action it is hard to see this situation turning around in the foreseeable future.”

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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